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448(d)(7)(C) attempt to fill the gaps by requiring both hospital
and nonhospital businesses that either cease to engage in the
trade or business to which a section 481(a) adjustment relates or
terminate existence prior to the end of the spread period to take
into account in the year of cessation or termination any
remaining portion of the section 481(a) adjustment. Under such
circumstances, the Chevron rule prevents us from substituting our
own construction of section 448 if the Commissioner's
interpretation is reasonable. Peoples Fed. Sav. & Loan
Association v. Commissioner, 948 F.2d at 300.
Are the Regulations Valid?
Final regulations interpreting section 448(d)(7)(C) are
provided in section 1.448-1(g), Income Tax Regs.10 The final
9 (...continued)
change pursuant to the provisions of secs. 1.446-1(e)(3) and
1.481-5, Income Tax Regs., that would prevent a taxpayer from
escaping forever taxation upon income previously deferred under
the hybrid method.
10 Sec. 1.448-1(g), Income Tax Regs., provides in pertinent
part as follows:
(g) Treatment of accounting method change and
timing rules for section 481(a) adjustment--(1)
Treatment of change in accounting method. * * *
(2) Timing rules for section 481(a) adjustment--(i) In
general. Except as otherwise provided in paragraphs
(g)(2)(ii) and (g)(3) of this section, a taxpayer required
by this section to change from the cash method must take the
section 481(a) adjustment into account ratably (beginning
with the year of change) over the shorter of--
(A) The number of taxable years the
(continued...)
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